State Obtains Complete Indemnity From Teacher Following Institutional Abuse Settlement

Warning: This article contains details about abuse which may be upsetting for some readers. Reader discretion is advised.

The NSW District Court awarded the State a complete indemnity against a former teacher following a $755,000 settlement of an institutional child sexual abuse claim.

In issue

The primary issues in dispute were:

1. Whether the second defendant (a former teacher employed by the State of NSW (the State)) sexually abused the plaintiff, a former student, and whether this conduct caused or materially contributed to the plaintiff’s injuries, loss and damage.
2. Whether the State, as the former teacher’s employer, was vicariously liable for his conduct and/or in breach of its non-delegable duty of care owed to the plaintiff.
3. Whether the State was entitled to indemnity or contribution from the former teacher for the settlement sum paid to the plaintiff.

The background

The plaintiff commenced proceedings in the District Court of New South Wales against the State (via the Department of Education) and Ricky Joseph Vella (the second defendant) claiming damages for personal injuries arising from sexual abuse perpetrated by the second defendant.

The abuse began in 2000 when the plaintiff was in Year 5 and the second defendant was her classroom teacher. It continued through 2001 and 2002, after the plaintiff had left school, facilitated by private tutoring at the plaintiff’s family home and outings outside the school environment.

The second defendant was criminally prosecuted and in 2023, ultimately convicted of offences involving the plaintiff and others. He was sentenced to six years’ imprisonment.

The plaintiff sued the State on grounds of vicarious liability, breach of a non-delegable duty of care and negligence. She also sued the second defendant for the sexual abuse perpetrated against her, which constituted the torts of battery and assault.

At the commencement of the hearing, the plaintiff settled her claim with the State. Judgment was entered into by consent for $755,000, comprising $480,000 for damages and $275,000 for costs, in full and final satisfaction of the plaintiff's claim against the State.

The decision at trial

State’s cross claim – statutory claim for indemnity

The State filed a cross-claim against the second defendant, seeking a complete indemnity (or for contribution for such amount as the Court considered just and equitable) as well as for damages for breach of contract, including for its costs of defending the plaintiff’s claim against it. A significant issue in the determination of the cross-claim was whether the State could establish that it was itself a tortfeasor liable in respect of the same damage as the second defendant.

The second defendant maintained his denial of abuse but, having filed a defence and making certain submissions, effectively withdrew from further participation in the hearing. The Court proceeded in his absence.

The Court upheld the State’s cross-claim for indemnity, finding that:

1. Damage was suffered by the plaintiff as a result of the second defendant committing the torts of battery and assault.
2. In light of the High Court’s decision in AA v Trustees of Roman Catholic Church for Diocese of Maitland-Newcastle (2026) 427 ALR 67, the State was a tortfeasor liable for the same damage as the second defendant based on its vicarious liability and breach of its non-delegable duty of care. In reaching this conclusion, the Court did not differentiate between the incidents occurring on and outside school premises.
3. The Court accepted that the State would have been liable at common law under vicarious liability for the conduct that occurred while the plaintiff was in Year 5, with the second defendant having misused the authority, power, and control over the plaintiff with which the State had vested him.
4. The second defendant (as cross-defendant) was liable for the damage caused to the plaintiff.
5. The second defendant’s conduct was found to have constituted 'serious and wilful misconduct,' precluding him from claiming indemnity from the State under the Employees Liability Act 1991 (NSW).

On apportionment, the Court accepted the State’s submissions that the second defendant’s conduct was intentional, criminal, sustained, and represented a gross abuse of trust. The State also submitted that the second defendant took steps to conceal his conduct from both the school and the plaintiff’s family. The Court concluded it was just and equitable that the second defendant contribute 100% of the settlement sum, thereby providing the State with a complete indemnity.

State’s cross-claim – breach of contract

The State also pursued a contractual claim for damages based on the second defendant’s employment. The State argued that, but for the second defendant’s breach, it would not have been exposed to the plaintiff's proceeding and therefore would not have incurred the costs of defending it.

The Court accepted that the second defendant had breached his employment contract with the State by failing to perform his duties with due care and skill and by engaging in serious and wilful misconduct. Applying the principle in Hammond & Co v Bussey (1887) 20 QBD 79, as affirmed in Provident Capital Ltd v Papa (No 2) [2013] NSWCA 156, the Court held that the costs incurred by the State in defending the third-party claim were recoverable as contractual damages.

The plaintiff’s claim against the second defendant

The Court otherwise awarded damages against the second defendant totalling $1,073,192. This sum included $40,000 for aggravated damages given the second defendant’s lack of remorse, failure to accept responsibility, and his raising of matters by bare assertion of 'intervening acts' on the eve of the hearing. Exemplary damages were refused as the second defendant had already been subjected to substantial criminal punishment.

Implications for you

This case is a landmark decision as the Court ordered a complete indemnity in favour of the State for the sexual abuse of a student perpetrated by a former teacher.

• The State’s liability was established under the doctrines of non-delegable duty and vicarious liability. However, the Court carefully distinguished the State’s legal responsibility from the teacher’s direct culpability and causal potency. This distinction was pivotal in determining that a 100% contribution was fair and equitable.
• The decision highlights the evidentiary importance of demonstrating that a school has effectively implemented the Department’s child protection policies and procedures in a case such as this.
• In circumstances where a teacher engages in sexual abuse, while concealing their actions from a school that has reasonably responded to the risk of abuse, the teacher may be held solely accountable for the financial consequences. This includes the settlement amount, the plaintiff’s legal costs, and the relevant institution’s defence costs.
• The key takeaway for institutional defendants is that, even where an abuse claim is settled without an admission of liability, a defendant institution may be able to pursue full recovery against the individual perpetrator, provided it can establish its own underlying liability and demonstrate that the settlement was objectively reasonable at the time it was entered into.
• Where an employee's serious and wilful misconduct gives rise to institutional liability, the employer may have a contractual claim for losses incurred as a consequence of the employee's breach including, in an appropriate case, the costs of defending the underlying third-party litigation.